NUAL CONSOLIDATED FINANCIAL STATEMENTS 1998

The notes on pages 11 to 24 form an integral part of the financial statements. SINGER THAILAND PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOWS FOR THE SIX-MONTH PERIOD ENDED 31 DECEMBER Consolidated Company 1998 1997 1998 1997 Unaudited Unaudited Baht Baht Baht Baht CASH FLOWS FROM OPERATING ACTIVITIES: Income (loss) before extraordinary item (49,996,982) (192,843,907) (49,996,982) (199,011,070) Adjusted by: Unrealised (gain) on exchange rate (22,425,956) - (22,425,956) - Depreciation 22,425,170 22,252,222 20,939,640 20,788,266 Amortisation of prepaid rent 12,933,605 14,044,363 12,933,605 14,044,363 Allowance for doubtful accounts 4,147,582 27,830,000 4,147,582 27,830,000 Increase in allowance for inventory obsolescence 8,773,877 5,039,242 8,700,000 9,000,000 Provision for diminution in value of other investment 170,000 - 170,000 - (Gain) loss on disposal of fixed assets 2,700,710 (680,595) 2,700,710 (680,595) Share of loss from subsidiaries - - 8,171,675 15,241,201 Decrease in inventories 163,863,432 299,807,630 155,907,223 310,914,060 Decrease in debtors and other current assets 826,347,983 760,717,020 837,368,202 678,887,337 (Decrease) in creditors and other current liabilities (274,883,079) (346,321,267) (285,267,887) (323,406,108) (Decrease) in accrued income tax (1,707,277) (95,229,261) - (94,263,432) Cash flows from operating activities before extraordinary item 692,349,065 494,615,447 693,347,812 459,344,022 Realised loss from the change in exchange rate system - (29,052,226) - (22,885,063) Net cash inflow from operating activities 692,349,065 465,563,221 693,347,812 436,458,959 The notes on pages 11 to 24 form an integral part of the financial statements. SINGER THAILAND PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOWS (Contd) FOR THE SIX-MONTH PERIOD ENDED 31 DECEMBER Consolidated Company 1998 1997 1998 1997 Unaudited Unaudited Baht Baht Baht Baht CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of fixed assets 255,455 804,682 255,455 804,682 Purchases of fixed assets (9,330,966) (21,003,699) (9,038,838) (20,749,008) (Increase) in prepaid rent (4,278,000) (9,401,708) (4,278,000) (9,401,708) Decrease (increase) in receivable from and loans to employees 1,248,729 (317,787) 1,192,271 (435,433) (Increase) in investment in subsidiaries - - (3,744,000) (1,248,000) Proceeds from sales of a subsidiarys share capital 6,000 2,000 - - Net cash (outflow) from investing activities (12,098,782) (29,916,512) (15,613,112) (31,029,467) CASH FLOWS FROM FINANCING ACTIVITIES: (Decrease) in bank overdrafts and short-term loans (616,571,670) (30,662,299) (612,126,686) (339,299) Repayment of long-term loans (20,000,000) (320,000,000) (20,000,000) (320,000,000) Proceeds from long-term loans - 180,225,000 - 180,225,000 (Decrease) in employees security deposits and Provident funds (27,903,130) (13,714,959) (28,271,412) (13,720,757) Dividend paid (397,840) (151,272,084) (397,840) (151,272,084) Net cash (outflow) from financing activities (664,872,640) (335,424,342) (660,795,938) (305,107,140) The notes on pages 11 to 24 form an integral part of the financial statements. SINGER THAILAND PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOWS (Contd) FOR THE SIX-MONTH PERIOD ENDED 31 DECEMBER Consolidated Company 1998 1997 1998 1997 Unaudited Unaudited Notes Baht Baht Baht Baht Increase in cash and cash equivalents 15,377,643 100,222,367 16,938,762 100,322,352 Cash and cash equivalents at beginning of the period 114,814,490 43,644,723 111,873,172 41,971,152 Cash and cash equivalents at end of the period 24 130,192,133 143,867,090 128,811,934 142,293,504 ADDITIONAL CASH FLOWS INFORMATION Interest paid during the period 199,397,212 227,555,159 191,364,464 222,346,481 Income tax paid during the period 2,795,439 97,000,663 187,272 94,403,878 The notes on pages 11 to 24 form an integral part of the financial statements. SINGER THAILAND PUBLIC COMPANY LIMITED NOTES TO CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS 31 DECEMBER 1998 AND 1997 1 Economic crisis and effects on companys operations The company operates in Thailand, which, together with a number of other countries in the Asia Pacific Region is currently experiencing an economic crisis. The crisis in Thailand has involved a slowdown in economic growth, a shortage of liquidity within the country and volatility of the securities market. The companys operations have been affected by the economic crisis in the current period and are expected to continue to be affected for the foreseeable future. The ultimate outcome of the economic crisis cannot be determined at present. 2 Summary of significant accounting policies 2.1 Basis for preparation of financial statements The consolidated and company financial statements are prepared in accordance with and comply with accounting principles generally in Thailand and regulations of the Stock Exchange of Thailand. 2.2 Principles of consolidation The consolidated financial statements incorporate the financial statements of Singer Thailand Public Company Limited and its subsidiaries. Intercompany transactions are eliminated in the consolidation. Subsidiaries are those companies in which the company holds, directly or indirectly, more than 50% of the voting shares and dominant influence is exercised in their management. Subsidiaries included in the consolidated financial statements are 1998 1997 % of shareholding % of shareholding Singer Industries (Thailand) Limited 99.88 99.88 Singer (Broker) Limited 99.70 99.70 Singer Trading (Thailand) Limited 99.86 99.86 Sansui (Thailand) Limited 50.86 50.86 S. T. L. Electronics Limited 99.84 99.84 2.3 Revenue recognition Sales comprise cash sales, credit sales and installment sales. Cash sales and credit sales are recognised when products are delivered. Installment sales represent sales under hire-purchase contracts whereby the related debts are effectively secured by the products sold. Revenue from installment sales comprises sales of product and interest. The interest on installment sales are calculated on customary financing terms. Sales of product and gross profit are recognised when contracts are signed and first payments are received. Interest is recorded in unearned carrying charges and recognised as earned by using the sum- of-the-months digits method. Collection commissions are accrued upon collection. 2.4 Trade accounts receivable In accordance with trade practice, installment accounts receivable are classified as current asset regardless of when payments are due. This receivable is effectively secured by the products sold. The company makes an allowance for doubtful accounts to cover the estimated losses that may be incurred in the collection of the debts. 2.5 Inventory Inventory is presented on the balance sheet at the lower of cost and net realisable value (NRV), cost being determined on the first-in first-out basis. The cost of purchase comprises both the purchase price and costs directly attributable to the acquisition of the inventory, such as import duties and transportation charge, less all attributable discounts, allowances or rebates. The company estimates net realisable value from the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale. 2.6 Investments Investment in an enterprise where the company holds more than 50 percent of its share capital or has control over its operations is considered an investment in a subsidiary company and is recorded using the equity method of accounting. Other investments are stated at cost less provision for permanent diminution in value. 2.7 Property, plant and equipment Carrying value at appraised value Part of land is presented at market value appraised by an independent appraisal specialist in March 1992 and September 1998. A revaluation increase is recorded as a Surplus on revaluation of land under the shareholders equity. Carrying value - at cost Property, plant and equipment are recorded at cost. Cost is measured by the cash or cash equivalent price of obtaining the asset and bringing it to the location and condition necessary for its intended use. Property, plant and equipment, except land, are presented in the balance sheet at cost less accumulated depreciation. Depreciation Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives are as follows: Buildings 20 years Building improvements 5 Years Machinery and equipment 5 Years Office furniture, fixtures and equipment 5 Years Motor vehicles 5 Years The company records depreciation as an expense in that period. When a long-term asset is retired, the company will write-off both the asset account and its related accumulated depreciation, and recognised any gain or loss from retirement of the asset. Capital expenditures Expenditures for addition, renewal and betterment, which result in a substantial increase in an assets current replacement value, are capitalised. Repair and maintenance costs are recognised as an expense when incurred. 2.8 Prepaid rent Prepaid rent is amortised over the rental period on the straight-line basis. 2.9 Foreign currency translation Foreign currency transactions during the year are translated into Baht at the rates of exchange ruling on the transaction dates, except where a transaction is hedged by a forward contract, in which case the contract rate is used. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Baht at the rates ruling at that date, with the exception of liabilities covered by forward contracts which are translated at the contract rates. Gains and losses on exchange arising on settlements and translation are recognised as income or expense when incurred. 2.10 Related companies Companies are considered to be related if one company has the ability to control or exercise significant influence over the other company in making financial and operating decisions or most of the shareholders or executive management of both companies are the same persons. 2.11 Earnings per ordinary share Earnings per ordinary share is computed by dividing the income before extraordinary item, extraordinary item, and the net income for the period by the weighted average number of paid-up ordinary shares outstanding during the period. 3 Change in the basis of estimation of provision expenses During the year, the company has changed the basis of estimation of certain provision expenses relating to sales in order to comply with current sales policy of the company. The net effect of this change in the basis of estimation was to increase net income for the six-month period ended 31 December 1998 amounting to Baht 64 million. 4 Trade and installment accounts receivable Consolidated Company 1998 1997 1998 1997 Unaudited Unaudited Baht Baht Baht Baht Accounts receivable trade and installment accounts 4,155,188,222 5,779,016,061 4,134,970,855 5,774,646,880 Less: Allowance for doubtful accounts (406,122,200) (325,862,200) (406,001,000) (325,862,200) 3,749,066,022 5,453,153,861 3,728,969,855 5,448,784,680 Less: Unearned carryings charges (650,447,932) (917,029,333) (650,447,932) (917,029,333) Trade and installment accounts receivable, net 3,098,618,090 4,536,124,528 3,078,521,923 4,531,755,347 The aging of overdue trade accounts receivable are set out below. Trade accounts receivable installment sales and credit sales Consolidated Company 1998 1997 1998 1997 Unaudited Unaudited Baht Baht Baht Baht Over 3 months to 6 months 50,994,054 53,221,486 50,994,054 53,221,486 Over 6 months to 12 months 70,718,046 72,630,946 70,718,046 72,630,946 Over 12 months 140,523,354 48,961,734 140,523,354 48,961,734 Total 262,235,454 174,814,166 262,235,454 174,814,166 Allowance for doubtful accounts 161,121,200 198,862,200 161,000,000 198,862,200 The aging of overdue for 1998 as presented above has not completely prepared as a result of the damage of the companys computer system by fire on 14 October 1998. However the companys management believe that the overdue accounts receivable balance was higher than actual results and they have adequately provided allowance for doubtful accounts for the overdue balance. Trade accounts receivable - other Consolidated Company 1998 1997 1998 1997 Unaudited Unaudited Baht Baht Baht Baht Over 3 months 424,664,099 265,798,695 424,664,099 265,798,695 Allowance for doubtful accounts 245,001,000 127,000,000 245,001,000 127,000,000 (More)